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7 Cards in this Set
- Front
- Back
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Market failure |
This occurs when there is a misallocation of resources in a free market resulting in a loss of social and economic welfare |
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Externality |
Third party effects I.e. Costs or benefits that spill over to third parties external to a market transaction. |
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Negative externality |
Cost imposed on a third party not involved with consumption or production of the good e.g. noise pollution. MSC > MPC |
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Negative externality - Private cost |
Private costs are the costs faced by the producer or consumer directly involved in a transation.
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Negative externality - Social cost |
All the conceivable costs associated with the actions of an economic transaction. |
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Positive externalities |
Benefit imposed on a third party not involved with the consumption or production of the good. |
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Positive externality - Private benefit |
The benefit to and individual of firm of an economic transaction eg better education leading to higher incomes in the future.
Doesn’t seem right fix it |
